Many Americans feel less financial stress thanks to pandemic-era government programs. Yet there are still signs of strain

While household debt reached a record $17 trillion in the second quarter of 2021, many American households have felt less financial stress this year thanks to Covid-19-related government policies.

That’s according to the federal Financial Stability Oversight Council, which released its annual report for 2021 on Friday. The council was created by legislation following the financial crisis of 2008-2009.

The report found that while many households have been buoyed by more generous unemployment insurance payments and stimulus checks, some people are still facing financial distress, particularly if they work in sectors that were harder hit by the pandemic.

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Still, there are signs that suggest that the economic recovery has helped boost Americans’ financial security.

While household debts are high, the ratio of that debt to disposable personal income is “well below its 2007 peak and slightly below pre-pandemic levels,” the report found.

Moreover, the household debt ratio, which measures total household debt payments versus disposable income, is fairly low due to rising incomes and low interest rates.

The personal savings rate spiked in April 2020 and this past March following direct payments from the government, though it returned to its long-term average in September.

Still, Americans may be feeling richer due to increases in equity in their homes, as well as gains in the stock market.

Though household net worth declined by 5.6% in the first quarter of 2020, it has since rebounded to all-time highs.

However, Americans continue to grapple with debt, with consumer credit representing about 25% of total household debt. That includes credit cards, auto loans, installment loans and student loans.

While credit card debt has decreased amid Covid-19, auto and student loan balances have increased.

Loans for subprime borrowers — those with less than ideal credit — declined in 2020 and 2021, likely due in part to tight lending standards for that population. However, fewer borrowers may now be classified as subprime due to Covid-19 relief programs, such as a CARES Act requirement for loans in forbearance to be reported as non-delinquent to credit reporting companies that may have lifted some credit scores.

Policies implemented during the pandemic have also contributed to a lower credit card and student loan delinquency rates.

However, the share of mortgages in some form of non-payment is higher than before the pandemic. Mortgage delinquency rates could rise as mortgage forbearance programs expire at the end of this year. Moreover, eviction rates could jump as the federal and state eviction moratoriums expire, the report found.